Does productivity growth boost savings? Causal evidence from transition episodes

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Authors: Abhishek Kumar, Sushanta Mallick, Kunal Sen
Cited by: 1
References: 46

Abstract

Abstract We introduce a novel approach to uncovering causation by exploiting transition episodes in aggregate macroeconomic data. Using a panel of 132 countries over 1961–2017, we identify twenty-six productivity-growth and forty savings transitions, episodes characterized by sudden, persistent, and unpredictable increases in growth and savings. Event-study evidence shows that productivity-growth transitions lead to sustained increases in savings, whereas savings transitions do not generate sustained growth effects. We conduct extensive robustness checks addressing staggered transitions, heterogeneous effects, and unobserved time-varying confounders. Having established the direction of causality, we estimate the effects of productivity-growth and productivity shocks (estimated separately for each country using a neoclassical model) on savings using panel Vector Auto-Regressions and local projections. We find that a one standard deviation increase in productivity growth raises the savings ratio by approximately 0.5 percentage points, highlighting the importance of policies that promote productivity growth to increase savings, rather than relying solely on savings-focused interventions.

Fields of Study & Subjects

Microfinance and Financial Inclusion Financial Literacy Pension Retirement Analysis COVID-19 Pandemic Impacts

Publication details

Journal / source
Oxford Economic Papers
Publisher
Oxford University Press (OUP)
Volume
78
Issue
2
Pages
511–539
Publication date
30 March 2026
Language
EN